[Click eStock] "HiteJinro, Profitability Weak Due to Increased Costs in Q3... Target Price ↓"

DS Investment & Securities Report

[Asia Economy Reporter Minji Lee] DS Investment & Securities maintained its buy rating on HiteJinro on the 5th but lowered the target price by 14% from the previous to 42,000 KRW.

HiteJinro's expected sales for the third quarter are projected to be 644 billion KRW, a 15.5% increase compared to the same period last year. Operating profit is expected to reach 55.6 billion KRW, up 24%, slightly below market expectations. Sales growth was steady due to market recovery following the reopening and price increases. In fact, soju is expected to see double-digit growth, with market share estimated to have risen to 69%. However, profitability was somewhat weak due to the combined effects of rising raw material costs, the Cargo Solidarity strike, and increases in logistics and labor costs.

Next year, HiteJinro is expected to continue external growth as the full recovery of the entertainment market and the effects of price increases are fully reflected. Although it may be somewhat difficult to increase market share due to intensified competition from competitors' new brand launches and promotional battles, growth is expected by increasing penetration in regional areas.

Jang Ji-hye, a researcher at DS Investment & Securities, said, "With one-time labor costs disappearing and fixed cost burdens decreasing due to external growth, higher profit growth relative to sales is expected," adding, "It is also positive that the overseas performance share of soju is expanding along with K-Food."

Finally, Researcher Jang analyzed, "As the timing of profitability improvement has been adjusted to next year, the target price has been partially revised."